Social Innovation Act, an N.J. bill seeking private investment in public health, advances

By Andrew George,
December 9, 2013 at 1:30 PM

A bill advanced Monday morning by a Senate panel would let the state Economic Development Authority establish a results-based, five-year “social innovation” loan pilot program for qualified nonprofit and private entities seeking to invest in preventative and early intervention healthcare services.

The bill, dubbed the "New Jersey Social Innovation Act" and released by the Senate Economic Growth Committee after a unanimous vote with amendments, is geared toward encouraging private investment in the field and keeping public spending down.

Under the legislation, eligible entities would be provided with a loan funded by private investors administered by the EDA in exchange for their public health services. If desired results, which include government savings, are achieved, the EDA would repay the investor's loan and potentially a percentage of the savings.

Michael Clark, of the Fels Institute of Government at the University of Pennsylvania, testified Monday in support of the bill, which he described as a "pay for success" or "pay for performance" model.

"Government only pays if interventions are successful," Clark said.

The bill, as initially presented to the panel, only contained language pertaining to services provided by nonprofit organizations. After state Sen. Joe Kyrillos (R-Middletown) noted that private sector involvement should be included, an idea also supported by the committee's other legislators, an amendment was added.

Another amendment to the bill came from state Sen. and panel chair Raymond Lesniak (D-Union) to ensure that the EDA's liabilities were clearly defined.

The legislation would also create a study commission which among other things, would help identify eligible entities for the program and aid in negotiating the loan agreements between lenders and eligible entities.

With the vote to release the bill, it now heads to the Senate Budget Committee for further consideration.

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Andrew George

Andrew George covers the Statehouse from NJBIZ's Trenton bureau. Born and raised in N.J., Andrew has also spent time as a reporter in D.C., Texas and Pa. His email is andrewg@njbiz.com and he is @AndrGeorge on Twitter.